Summary:

Employers are not required to provide as a benefit any paid vacation time to their employees.  However, if they do provide paid vacation time, under Massachusetts wage law, employees who are “discharged” are entitled to be paid for all earned but unused vacation time.

Overview of State Law:

The Massachusetts Supreme Court recently ruled that a Massachusetts employer must pay a discharged employee for any accrued unused vacation time, despite the fact that  the employer had a written policy that explicitly stated unused vacation time was “unearned” and could be forfeited.  The Court agreed with a prior attorney general’s interpretation of the Massachusetts wage law, finding that “earned” vacation time payments are wages that must be paid to an employee upon termination of employment.

The Massachusetts Wage Act states, in part:

ʺEvery  person  having  employees  in  his  service  shall  pay  weekly  or  bi‐weekly  each  such  employee  the  wages  earned  by  him  to  within  six  days  of  the  termination  of  the  pay  period  during  which  the  wage  were  earned  if  employed  for  five  or  six  days  in  a  calendar  week…;  and  any  employee  discharged  from  such  employment  shall  be  paid  in  full  on  the  day  of  his  discharge…The  word ʺwagesʹʹ shall  include  any  holiday  or  vacation  payments  due  an  employee  under  an  oral  or  written  agreement…  No  person  shall  by  a  special  contract  with  an  employee  or  by  any  other  means  exempt  himself  from  this  section.ʺ

The Massachusetts Attorney General’s interpretation that the Court followed is contained in a 1999Advisory, which stated:

“Like wages, the vacation time promised to an employee is compensation for services which vests as the employee’s services are rendered. Upon separation from employment, employees must be compensated by their employers for vacation time earned under an oral or written agreement.”

The same Advisory approved “use it or lose it” vacation policies that require employees to use all accumulated vacation by a certain period of time. The Court found that this was not inconsistent with a determination that accrued vacation pay cannot be forfeited – stating:  “The Attorney General has … adopted a consistent view that an employee earns, by his or her service, the right to take paid vacation; the employee may lose the right through voluntary nonuse, but if an employer interferes with the employee’s ability to use it, for example by discharging the employee, the employer must pay the value of the earned vacation.”  So, accrued vacation time can still be lost where there is a “use it or lose it” policy, but not as the result of a termination.

There is however, one additional hurdle that a Massachusetts employer must clear in order to have a valid “use it or lose it” policy.
The Advisory requires that employees receive adequate notice of ʺuse it or lose itʺ policies, and that employers ʺmust ensure that employees have a reasonable opportunity to use the accumulated vacation time within the time limits.”

What remains unclear, to some extent, is whether the reason for an employees discharge impacts their entitlement to be paid for accumulated vacation time.

The Court’s opinion only dealt with an involuntary termination (involving a layoff / reduction in force) and did not address the situation where an employee leaves a job voluntarily (quits or voluntarily resigns), acknowledging: “We do not reach the question whether the Wage Act requires an employee who leaves a job voluntarily, with earned vacation time unused, to be paid for that earned and unused vacation time.”

What is very clear is the position of the attorney general on this issue – the reason(s) for an employee’s termination does not impact their entitlement to be paid for accumulated vacation time.  The Advisory states:

ʺEmployees who have performed work and leave or are fired, whether for cause or not,

are entitled to pay for all the time worked up to the termination of their
employment, including any earned, unused vacation time payments.ʺ

As there are important time limits that apply to any potential claim you may have, you should act promptly to insure that your rights are protected. Call us at 713-782-LAW1 (5291) or toll free at 1-866-559-0400 or submit your information using our convenient online intake form.